AFCA has seen fewer COVID-19 linked complaints than expected, but has predicted this may rise when government and lender support is wound back.
The Australian Financial Complaints Authority (AFCA) has reported that it saw fewer complaints than it anticipated relating to the coronavirus pandemic, which it attributed to the proactive response taken by financial firms.
Chief ombudsman and CEO David Locke said complaints relating to the COVID-19 pandemic were more likely to involve financial difficulty, with 20 per cent of COVID-19 related complaints connected to financial hardships.
Since the virus was declared a pandemic, AFCA has received 4,773 complaints relating to COVID-19, with most complaints concerning general insurance claims and credit. As at 30 June, 56 per cent of these cases have been closed.
AFCA received 1,711 complaints relating to credit, which comprised of 36 per cent of all complaints during COVID-19. There were 419 complaints about failure to respond to requests for assistance.
“We anticipate seeing more financial difficulty related COVID-19 complaints over the next six months as government support, such as JobKeeper payments are wound back, along with the end of financial firm initiatives such as a ban on rental evictions, and mortgage pausing,” Mr Locke said.
AFCA received 1,813 complaints relating to general insurance claims, while 791 COVID-19 complaints were about superannuation, the majority of which related to early access of super.
A total of 965 COVID-19 complaints involved financial difficulty.
Mr Locke commended financial institutions for their prompt response to the pandemic.
“As always, we encourage banks and insurers to maintain open and transparent communication with their customers about the support available to them if they’re experiencing financial difficulty,” he said.
Figures over 12 months
Australians in dispute with their bank, insurer, superannuation fund, or financial firm have lodged more than 80,000 complaints in the last 12 months, with AFCA securing $258.6 million in compensation and refunds direct to consumers.
Consumers made 80,546 complaints to AFCA between 1 July 2019 and 30 June 2020, which is a 13.7 per cent increase in monthly complaints compared to the 2018/19 financial year.
AFCA resolved 78 per cent of cases, with a majority being settled in 60 days or less, while 73 per cent of complaints were settled by agreement or in favour of the complainant.
Banks were the most complained about financial institution, receiving 28,411 complaints, while credit providers ranked third with 9,857 complaints lodged against them.
According to Mr Locke, most complaints have been about credit, which received 43 per cent of all complaints by product line, followed by general insurance at 24 per cent and superannuation at 9 per cent.
“One in 10 complaints also related to financial difficulty, where a consumer was unable to make repayments on loans due to unforeseen circumstances or over-commitment,” he said.
In terms of total complaints received by main product issues in credit, 6,336 complaints related to credit reporting, while there were 3,614 complaints regarding responsible lending issues. There were 3,089 complaints against financial firms’ failure to respond to request for assistance, while 2,151 complaints related to incorrect fees and costs, and 1,927 complaints related to service quality.
AFCA bans paid representative from filing complaints
In addition, AFCA has also announced that it has banned paid representative MCR Partners from lodging complaints on behalf of consumers and small businesses.
This is the first time AFCA has exercised its discretion to exclude a third party paid representative under AFCA Rule 2.2.
MCR Partners, including its directors, employees or agent, is banned from lodging complaints for 15 months, from 26 June 2020 to 30 September 2021.
AFCA said it would review its position in September 2021, to decide whether to again accept complaints lodged by MCR, subject to specific conditions. Any such review would also consider MCR’s observance of the period of exclusion.
Commenting on the ban, Mr Locke said: "It is important that consumers know they do not need to pay someone to lodge a complaint with AFCA. We are an independent ombudsman service, and we are free to consumers.”
“AFCA is very clear about its expectations of agents who lodge complaints on behalf of consumers. We expect that agents act in a manner compatible with our Rules and purpose."
While AFCA will no longer deal with MCR on any new or existing complaints, it said it will continue to process complaints already in the system, either dealing directly with consumers or a replacement representative.
AFCA said it has contacted those who currently have a complaint lodged.
Under AFCA Rule 2.2, AFCA may use its discretion to exclude a complaint if the complainant is represented or assisted by an agent who may receive payment for this service.
According to the rules, the discretion will only be used in cases where there are compelling reasons for deciding that AFCA should not consider the complaint.
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Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.
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